BOB: Greater Flexibility From Dedollarisation?

Back in April, when the boliviano stood at BOB7.9500/US$, we wrote that 'although the long-term trend should, in our estimation, be very much to the upside, it will be a slow process'. This remains our view, as the exchange rate has only seen one, almost negligible, move since then, to BOB7.9400/US$. That said, this represents a historical breakthrough for the Bolivian economy, as the crawling depreciation that characterised exchange rate policy over the past decade has been reversed, as of July 2005, and the unit has already been allowed to climb to mid-2004 levels. Another incremental rise is overdue, in our assessment, but we are not expecting it to be of any exciting magnitude. One step gain, probably just to BOB7.9300/US$, is to be expected by the end of the year.

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